California: A National Model for Health Benefit Exchanges?

As states implement health benefit exchanges, they’ll likely look west for guidance.

On Sept. 30, Gov. Arnold Schwarzenegger launched California to the forefront of the debate surrounding states’ role in implementing a key part of the federal health-care reform package known as the Patient Protection and Affordable Care Act. He signed two bills that together create the framework for the California Health Benefit Exchange.

California was the first state in the nation to pass legislation to develop the Health Benefit Exchange and now will be the first to implement it. This exchange, described by the San Francisco Chronicle as a “virtual marketplace where consumers will be able to buy coverage under the new federal health law,” won’t be available to consumers until January 2014. But because it’s the first exchange being set up in the U.S. since the federal health-care reform law passed, it likely will serve as a model for other states.

California jumped quickly on this legislation because it had aggressively pushed for health-care reform three years ago -- reform that Schwarzenegger says included requiring all Californians to have coverage, making coverage affordable for low-income families, ensuring that individuals with pre-existing conditions weren’t denied coverage, emphasizing prevention and wellness, and containing costs.

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“I’m proud that health-care reform is now the law of the land -- not just in our state, but in all 50 states in the United States,” Schwarzenegger said at the press conference. “In the end, nearly all of the objectives in our reform plan were included in the federal reform plan.”

Janet Coffman, a professor at the Philip R. Lee Institute for Health Policy Studies at the University of California, San Francisco, echoed this sentiment.

“State health-care reform ultimately was not successful here in 2007, but the health exchange was part of that discussion,” she told The Sacramento Bee. “Leaders had spent a lot of time defining what they wanted to see. While other states still are wrestling with some of the concepts behind federal health-care reform, some of our politicians who considered many of these provisions three years ago are some of the same people we have in office now. They’ve been able to move swiftly from contemplation to implementation.”

And as other states consider their options, they’re keeping an eye on the Golden State, according to Kathleen Stoll, director of health policy for Families USA, a Washington, D.C.-based health advocacy group.

“The two bills that California passed and the governor signed provide guidance not only on how to set up an exchange governing board with strong conflict of interest guidelines,” she says, “but it also provides a model for how to set up an exchange that ensures that consumers will get good value for their premium dollars.”

When legislative sessions begin in 2011, many state legislatures will likely begin pulling together their respective basic frameworks, filling in the details after receiving guidelines from the U.S. Department of Health and Human Services. Joy Johnson Wilson, health policy director at the National Conference of State Legislatures, told Congressional Quarterly (CQ) that she predicts state lawmakers will start working on their exchange structures in 2011, but the process could last into the following year. By January 2013, exchanges must be certified by the federal government, and Jon Kingsdale, the former executive director of the Massachusetts Health Connector, told CQ that the exchanges must be doing test runs by October 2013.

California’s legislation can assist other states, Stoll says, because it authorizes the exchange to use selective contracting, which means that the exchange can leverage the purchasing power of everyone within it.

The legislation also permits the standardization of plans, which Stoll says helps make the whole process of selecting a plan that meets citizens’ needs easier. And the exchange is protected against adverse risk selection, so that it consists of a mix of both healthy and sick people. “Those are all really important issues,” she says. “So I think states across the country will really look at this California legislation for guidance, and I think [the legislation] creates a foundation that other states can begin to look at.”

California, the nation’s most populous state -- and one that has led the country on so many fronts, from higher education to pollution control -- could be breaking new ground regarding health-care reform, and other states just might follow.